Unlocking New Gas Reserves

Masjood Jafri
Continued growth is forecast in the global demand for liquefied natural gas (LNG). The U.S. plans to build more LNG infrastructure.

The global LNG industry shows strong growth, with project proposals growing faster than the industry’s capabilities to develop them. The development of new supply is a challenge the U.S. hopes to address, potentially becoming the world’s third-largest LNG exporter, after Qatar and Australia, by the end of the decade. It’s an exciting opportunity for global oil and gas industry players across the LNG value chain, from exploration and liquefaction to transportation and re-gasification.

Faithful+Gould has been examining a number of natural gas facilities with our clients, witnessing a significant volume of LNG facility development along U.S. coastlines. The increase in shale gas production and lower price in the U.S. has renewed interest in exporting LNG. Four LNG export terminals have therefore been given construction go-ahead by the U.S. Federal Energy Regulatory Commission (FERC) and more than a dozen are awaiting approval.

To build these large-scale high-quantum LNG liquefaction plants, the industry is exploring creative financing models...

Project finance, however, remains a critical issue. To build these large-scale high-quantum LNG liquefaction plants, the industry is exploring creative financing models that could improve the risk and reward relation in the LNG value chain. Some U.S. LNG plants are spearheaded by companies with insufficient resources to shoulder multi-billion projects. As a result, they are seeking both equity and debt from various financing sources including banks, Export Credit Agencies (ECAs), Master Limited Partnerships (MLPs) and bond investors.

These projects have high levels of complexity and risk, and significant technological, managerial and logistical challenges. A credible and dependable supply chain, strong delivery track record and high-caliber management is vital for reaching the final investment decision (FID) in the expected timescales.

These projects have high levels of complexity and risk, and significant technological, managerial and logistical challenges.

Achieving the FID and raising the finance does not guarantee the project’s success. Technical, commercial and financial perils, if not managed effectively, can lead to potential cost and schedule overruns, affecting overall project performance. Several LNG liquefaction projects under construction in Australia, for example, have reported significant overruns. A robust risk management process can help to mitigate these problems and enables the owner’s project expectations to be met.

The LNG regulatory approval processes pose a significant risk to the project schedule. Although progress has been made to streamline the permitting, it remains complex and lengthy. LNG plant owners who invest in advance preparation for the regulatory and agency approvals tend to achieve the FID earlier and start construction works on time. As well as avoiding unwanted delays, this prevents exposing the project to additional changes and negotiations with EPC contractors and other supply chain partners.

LNG plant owners who invest in advance preparation for the regulatory and agency approvals tend to achieve the FID earlier and start construction works on time.

Project success depends on a myriad of technically and commercially complex decisions. These include the development plan; approvals and permits; contracts and agreements; selection of EPCs; procurement strategy; engineering, design and technology; construction approach; costs and schedule; and project interfaces with existing and future infrastructure. Faithful+Gould provides an integrated project and program management service to ensure the LNG project concept can be taken through to reality.

Our portfolio of offshore and onshore oil and gas projects includes the full LNG value chain, reinforced by the expertise of our parent company Atkins. Together we have contributed to the development of large-scale liquefaction facilities worldwide.

As technical advisors to both owners and lenders, we not only understand what makes a successful project, but more importantly why some fail. Drawing on our extensive experience with some of the world’s most challenging energy projects, we assist clients in meeting time, cost, quality and strategic project objectives. Our global LNG knowledge and local presence enables our clients to balance the known and unknown risks through all life cycle phases and improve the overall performance and delivery.

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